Congress ties DOD's hands

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When Congress passed the Defense Authorization Act last year, lawmakers put into motion a provision that could curtail Defense Department officials' ability to issue certain contracts as they see fit.

Section 843 of the law went into effect late last month and limits the length of some contracts awarded by the department to five years, said Deidre Lee, DOD's

director of procurement and acquisition policy.

"All tasked and delivery order contracts will have a limit of a total of five years," Lee said.

Although vendors are unlikely to abandon DOD as a client and source of revenue, the new provision will impact the department's ability to conduct some business.

"I anticipate some acquisition strategies will need to be restructured if the strategy contemplated a long-term contract," Lee said. "It is possible that upfront program costs could increase as investments are spread over a shorter contract period. However, we have not seen evidence of this occurring."

Smaller businesses could benefit from the provision, even if it is short-lived, said Ray Bjorklund, senior vice president of consulting at Federal Sources Inc.

"Because the opportunity to compete for shorter-term contracts would come up more frequently, businesses get a second chance to win the work," Bjorklund said.

Lee said congressional staffers acknowledge that they made a mistake with the strict legislative language, but there is not another bill that would allow lawmakers to change the language.

She also said the provision was intended to limit to five years the base period of time, not including options, that the task and delivery order contracts could be awarded.

"DOD is hopeful that the five-year limit reflected in law on the total period

will be revised upward in [fiscal] 2005," Lee said.

Congressional intent is what has become the issue, according to Steve Kelman, a

Harvard University professor and former director of the Office of Federal Procurement Policy. Kelman said situations exist in which multiyear task order follow-on contracts were being issued before a contract had expired.

"I think what Congress has in mind is a relatively important policy issue about longer vs. shorter maximum contract lengths," Kelman said. "The people who are more enamored of the traditional forms that competition took prior to procurement reform tend to like short contracts, while procurement reformers tend to like to use competition in a different way — that is, to reward or punish based on how well they perform."

Although Lee said she does not necessarily agree with the length of the limit, she said she was not likely to interpret the language to mean anything other than what it specifically says.

"Generally, I think five years is a fair term limit in most cases to ensure competition is injected into the process at the

appropriate time," she said. "However, I

recognize there may be some scenarios where longer periods may offer substantial benefit to the government. We need the flexibility to have long-term contracts up to 10 years or longer when using award-term incentives, as long as a business case supports it."

Bjorklund agreed, saying that it does not make sense for some contracts to have lengthy terms.

"A five-year or even a three-year term limit on contracts for grounds maintenance at a military installation makes sense," he said. "There's not a lot of investment required, recurring competitions keep the contractor motivated to do well, and other businesses get an opportunity to compete and win the work. On the other end of the spectrum, contracts for advanced professional services, such as engineering and acquisition support, should have term limits of five to seven years. The continuity afforded by a longer-term contract helps the government work more effectively on solving complex problems."

Lee said she understands the frustration that this is likely to cause with companies looking to work with the department.

"It really can ruin the award term," she said. "Companies must now write a contract for three or four years to give themselves some head room" under the five-year cap.